Inheritance Wild Card Exemption and our Chapter 13

[gld2pan]

Filed Chap 13 in March of 2012 currently in 60 mo plan. Sept 2013 my husbands father passed and between accts and sale of home his share 93K. Lots of talk with attorney war chest - involved stoping trustee payments and refilling didn't like that, spend all the money and refilling - didn't like that option either. Both would mean another 5 yrs as unfortunately inheritance was not enough to just pay all the debts off. We just wanted to keep enough money to cover some car repairs on 96 Chevy (we should have bought a new car before but just didn't feel right, would now if could go back in time) and enough to cover tax bill we are going to face since ended up with gain on home. Long story on that and basically no relationship with siblings anymore. We requested to be able to keep 10K to cover car and taxes. Come to find out we still had some of our wild card exemption left. Attorney sent admendment to sign and return and advised he negoiated 11K in wild card and 5K for tax liability. So yea!!! we get to keep a little over 16K. Rest will go to trustee and debts. We will end up paying 100% and I'm hoping to end bk 6-8 mos early waiting to hear details on that yet. Our plans are to drive car till dies and save money till we have to deal with replacing car. Just want to share info as we read so many different things during this last 9 mos.

[justbroke]

You have a good attorney. I'm glad that this has worked in your favor.

[LadyInTheRed]

I too am glad it worked out. Thanks for sharing your experience.

I wanted to comment on the gain on the home. Is this a home you inherited from your father? If so, and unless it was held in an entity of some sort of a "shelter" or "exemption" trust (which is common for a decedent who had a joint trust with a pre-deceased spouse) or personal residence trust, the capital gains tax basis should get "stepped up" to the value on your father's date of death so that you would only pay capital gains tax on any increase in value between the date of death and the sale date. If there is any doubt, make sure to get advice from a CPA with experience with estate issues.

[gld2pan]

There was a trust setup when both were alive. His wife passed back in the 90's and trust was split martial and exempt. We had to use half of value of house when she passed and half when he passed. Trust already had printout of value of home at time of her passing. We hired a CPA and she ran it several different ways to comeup with best senerio.

[LadyInTheRed]

There was a trust setup when both were alive. His wife passed back in the 90's and trust was split martial and exempt. We had to use half of value of house when she passed and half when he passed. Trust already had printout of value of home at time of her passing. We hired a CPA and she ran it several different ways to comeup with best senerio.

Sounds like it was done correctly. I have worked on estates where inexperienced CPAs reported gain on assets without giving them a deserved step up. So, I thought I'd make sure you were not paying tax you shouldn't.